ERC-404 – Ethereum’s new experimental token standard and ETH implications
|- Ethereum’s ERC-404 is a new token standard that has taken the market by storm.
- The new experimental standard combines the best of fungible and non-fungible tokens standards, ERC-20 and ERC-721, respectively.
- Pandora, the first token that uses ERC-404, has skyrocketed 5.400% since its launch on February 2.
Ethereum (ETH) price has remained lull despite the Ether ETF applications. But the launch of ERC-404 could be a key catalyst that kickstarts a rally for ETH.
Also read: Ethereum price poised for gains as Dencun upgrade goes live on the testnet
What is ERC-404?
ERC-404 is an experimental token standard built on the Ethereum blockchain that aims to combine the functionalities of ERC-20 tokens (fungible tokens) and ERC-721 tokens (non-fungible tokens, or NFTs) into a single standard. This means that ERC-404 tokens can be both fungible and non-fungible, depending on the specific implementation.
In a nutshell, ERC-404 is a new way of defining digital assets like tokens or collectibles on the internet.
ERC-404 key features breakdown:
- Hybrid functionality: ERC-404 tokens can represent both fungible and non-fungible assets, offering flexibility for various use cases.
- Native liquidity: Unlike traditional NFTs, ERC-404 tokens have built-in liquidity mechanisms, allowing for easier trading and fractional ownership.
- Programmable scarcity: The supply of ERC-404 tokens can be dynamically adjusted through code, enabling innovative tokenomics models.
How does ERC-404 work?
One NFT of the underlying project is awarded to the wallet that has a full ERC-404 token. When the token is sold, the NFT is automatically burned. Both the tokens and NFTs can be traded independently.
Is ERC-404 safe?
ERC-404 is not vetted, hence an experimental standard. Its development has not followed the traditional route – Ethereum Improvement Proposal (EIPs). Additionally, it has not undergone a full external audit, but it has been tested extensively.
The only similarity ERC-404 and other ERC standards like ERC-20 or ERC-721 share is the name “ERC,” which stands for Ethereum Request for Comments.
Projects using ERC-404 token standard
Pandora and DeFrogs are the only two projects that have implemented the ERC-404 token standard. The latter project’s token, DEFROGS price, is up 21% in the last hour, according to data from CoinGecko.
Ctrl, the team behind the launch of the experimental token standard, has also launched Pandora. PANDORA token started trading on February 2 at $212 and is currently trading at $21,000.
PANDORA/WETH 4-hour chart
Also read: Week Ahead: Crypto markets to turn volatile as AI steals the spotlight
Will ERC-404 push Ethereum price higher?
It is unlikely that the launch of projects based on ERC-404 standards will push Ethereum price higher. Since Ethereum is the second-largest cryptocurrency by market capitalization, it is highly correlated with Bitcoin price and is unlikely to be influenced by the new narrative.
But with the tides turning bullish for Bitcoin price, the outlook could get optimistic for not just Ethereum but ETH-related altcoins as well.
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